Grade Inflation

We, university folks, are frequently accused of our students’ grade inflation. But nothing can be compared to what is happening now in the financial world. From Reuters: General Electric Capital corp credit default swaps (CDS) trade 8.5% percent up front and 5% annually (in lay terms, it means that it would cost $850,000 in an up front payment, plus $500,000 in annual payments to insure $10 million of GE Capital debt). And GE Capital are still rated AAA!

This is absurd. It defies reality. This is what “CDS trading percent up front” normally means: